Documents considered by the Committee on 14th October 2015 - European Scrutiny Contents


14 EU Budgets: revenue

Committee's assessment Politically important
Committee's decisionNot cleared from scrutiny; further information requested
Document detailsProposal for a Council Regulation amending Regulation (EU, Euratom) No. 609/2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements
Legal baseArticles 322(2) TFEU and 106a EURATOM; consultation; QMV
DepartmentHM Treasury
Document Numbers(37094), 11949/15, COM(15) 447

Summary and Committee's conclusions

14.1 The EU's revenues are known as Own Resources and are composed of three elements — traditional (customs duties and sugar levies), VAT and GNI-based own resources. The methods and procedure for making available Own Resources during the period 2007-13 were set out in Council Regulation (EC, Euratom) No. 1150/2000, which remains applicable until the Own Resources system for the period 2014-20 comes (retrospectively) into operation, probably in mid-2016, following ratification by all Member States.

14.2 In December 2014 Council Regulation (EC, Euratom) No. 1150/2000 was amended, at the behest of the Government, to enable any Member State which faced an exceptionally large adjustment to its VAT-based or GNI-based payments in previous years to defer this adjustment.

14.3 In May 2014 Regulation (EU, Euratom) No. 609/2014 was adopted to replace Council Regulation (EC, Euratom) No. 1150/2000, once the new Own Resources system becomes operational. At the time of the new Regulation's adoption the Commission undertook to propose an amendment concerned with interest on late payments by Member States.

14.4 This proposal to amend Regulation (EU, Euratom) No. 609/2014 now presented by the Commission is to fulfil its undertaking. However, since Council Regulation (EC, Euratom) No. 1150/2000 will lapse once the new Regulation becomes operational, the amending proposal would also continue the flexibility on large adjustments the Government secured in December 2014. The Commission also take this opportunity to propose other, largely technical, amendments to Regulation (EU, Euratom) No. 609/2014.

14.5 The Government tells us that it welcomes proposals to simplify and streamline the process in line with the changes secured in 2014 and will consider the detail of the proposed Regulation carefully and consult stakeholders in order to establish its negotiating position.

14.6 While there is no apparent need for concern with this proposal, we will consider it again when the Government tells us of what issues, if any, emerge when considering its negotiating stance. Meanwhile the document remains under scrutiny.

Full details of the document: Proposal for a Council Regulation amending Regulation (EU, Euratom) No. 609/2014 on the methods and procedure for making available the traditional, VAT and GNI-based own resources and on the measures to meet cash requirements: (37094), 11949/15, COM(15) 447.

Background

14.7 In May 2014 a Council Decision on the system of Own Resources (the EU's revenues), the Own Resources Decision, was adopted, as part of the Multiannual Financial Framework package for the period 2014-20. At the same time Regulation (EU, Euratom) No. 609/2014, about making available traditional, VAT and GNI-based Own Resources and meeting meet cash requirements, was also adopted. This Regulation is to come into effect at the same time as the Own Resources Decision, that is, once the Decision has been ratified by all Member States. (The UK has ratified the Decision through the passage of the European Union (Finance) Act 2015.) The new Own Resources Decision and Regulation (EU, Euratom) No. 609/2014 will replace the previous Own Resources Decision and Council Regulation (EC, Euratom) No. 1150/2000.

14.8 When the Own Resources Decision and Regulation (EU, Euratom) No. 609/2014 were adopted the Commission committed itself to submit a proposal to amend Article 12 of the Regulation to allow for a revision to the procedure for calculating the interest on Own Resources which Member States make available belatedly.

14.9 In late 2014 the Government secured an amendment to Council Regulation (EC, Euratom) No. 1150/2000 to enable any Member State which faced an exceptionally large adjustment to its VAT-based or GNI-based payments in previous years to defer this adjustment, normally made on the first working day of December, until September of the following year. This flexibility was also offered to all Member States if the cumulative adjustment was exceptionally large.

The document

14.10 This proposed Council Regulation is to address the promise for a revision to Regulation (EU, Euratom) No. 609/2014 and to incorporate a number of other issues. At present interest on late payment of Own Resources is charged at a base rate (the Bank of England Repo rate in the case of the UK), plus two percentage points punitive uplift, increasing by 0.25 percentage points for each month of delay, with the final percentage figure applying for the whole period of delay. The Commission's proposal is to increase the two percentage points uplift to 3.5 percentage points but to then apply a cap to the monthly increases so that the maximum increase to the base rate would be 20 percentage points.

14.11 In order to entrench the flexibility on payments that the Government secured in 2014 through the amendment of Council Regulation (EC, Euratom) No. 1150/2000, the Commission has proposed further amendments to Regulation (EU, Euratom) No. 609/2014. This is because, as the amended Council Regulation (EC, Euratom) No. 1150/2000 will expire upon the introduction of Regulation (EU, Euratom) No. 609/2014, the Commission are proposing to amend that new Regulation to reflect the amendments to Council Regulation (EC, Euratom) No. 1150/2000. Under the Commission's proposal it would notify Member States of their VAT and GNI adjustments in January of the year following its receipt of the relevant data from the Member State, with payment then being due on the first working day of June.

14.12 The Commission is also proposing an increase in the amount of VAT-based and GNI-based contributions it can draw forward. Under the current rules itis allowed to draw forward up to a maximum of two twelfths of each element into the first quarter. Whatever draw-forward is made for VAT is replicated on the UK abatement. The amendment which the Commission is proposing would increase this amount by one twelfth but also extend it to the first six months of the calendar year rather than the first quarter.

14.13 The Commission also proposes some other technical changes as follows:

·  streamlining of Article 10 into three Articles to make it easier to follow;

·  the possibility of releasing Member States from financial responsibility in cases of deferred entry in the accounts, or deferred notification of customs debt, in order not to prejudice criminal investigations;

·  an increase from €50,000 to €100,000 in the threshold for irrecoverable amounts which need to be reported; and

·  other minor amendments of a technical nature, including updates to legal references and drafting improvements.

The Government's view

14.14 In his Explanatory Memorandum of 28 September 2015 the Financial Secretary to the Treasury (Mr David Gauke) first notes that the Commission's proposal would entrench the flexibility on payments that the Government secured in 2014 and would routinely allow Member States more time to scrutinise the relevant data and calculations and to make payments. He also notes, on the issue of the wider mechanics of the annual adjustments exercise and the subject of interest on late payments, that the Commission makes a number of further suggestions for improvements. The Minister then comments that the Government welcomes proposals to simplify and streamline the process in line with the changes secured in 2014 and will consider the detail carefully. He adds that the proposal includes changes to other aspects of the implementation of the Own Resources system, which also touch on the work of HM Revenue and Customs and that the Treasury has started its consultation with the stakeholders who would be affected by the proposed changes and will evaluate and reflect their input in its analyses and subsequent negotiating position.

14.15 Finally the Minister tells us that there is no confirmed timetable for negotiation of this proposal, but the current expected date of entry into force of the Own Resources Decision is mid-2016.

Previous Committee Reports

None.


 
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